Question

When it is time to go on her trip, Jada decides she really doesn’t want to spend all of the money she has saved and will have a "staycation" instead. She makes plans for the 10 weeks off and instead invests most of her saved money, $6,000. Jada wants to earn 7.4% by putting some money in a mutual fund that earns 10% per year and the rest into bonds that earn 5% per year. How much should Jada invest in each fund?

A. $2,500 in the mutual fund, $3,500 in bonds.
B. $3,500 in the mutual fund, $2,500 in bonds.
C. $4,000 in the mutual fund, $2,000 in bonds.
D. $2,000 in the mutual fund, $4,000 in bonds.

Answer 1

Jada should invest $4,000 in a mutual fund earning 10% per year and $2,000 in bonds earning 5% per year to achieve her goal of a 7.4% return on her total investment of $6,000.

Step-by-step explanation:

Jada wants to earn a total of 7.4% on her investment of $6,000 by investing in a combination of a mutual fund that earns 10% per year and bonds that earn 5% per year. To determine how much Jada should invest in each option, we will set up a system of equations. Let x represent the amount invested in the mutual fund and y represent the amount invested in bonds. Therefore, we have:

x + y = $6,000 (since all the money is invested between these two options)

The second equation comes from the desired overall interest rate:

0.10x + 0.05y = 0.074 * $6,000

By solving these two equations, we find that Jada should invest $4,000 in the mutual fund and $2,000 in bonds to achieve her desired interest rate of 7.4%.